Fungibility.html



Fungibility is the property of a good or a commodity whose individual units are capable of mutual substitution, where one unit of a commodity can be exchanged for another unit of the same commodity in the same quantity and grade. Examples of highly fungible commodities are crude oil, precious metals, and currencies.

Fungibility versus liquidity

Fungibility is different from liquidity. A good is liquid and tradable if it can be easily exchanged for money or another different good. A good is fungible if one unit of the good is substantially equivalent to another unit of the same good of the same quality at the same time and place.

As an example, one US$10 bank note is interchangeable with another. Cash is fungible. A barrel of West Texas Intermediate crude oil is fungible (direct exchange) with another barrel of the same crude oil. Oil (of the same type) is fungible.

Fungibility does not imply liquidity, and liquidity does not imply fungibility. Jewels can be readily bought and sold (the trade is liquid), but individual diamonds, being unique, are not interchangeable (diamonds are not fungible). Indian rupee bank notes are interchangeable in London (they are fungible there), but they are not easily traded there (they are not liquid in London).

Fungibility in law

In legal disputes, when one party is compelled to remedy another party as the result of a ruling or adjudication, the appropriate legal remedy may depend on the fungibility of the underlying right, obligation or property interest that is intended to be restored.¹ Depending on whether the interests of the aggrieved party are fungible (a determination made by the trier of fact), the appropriate remedy may change. For example, a court may require specific performance as a remedy for breach of contract, instead of the more favored remedy of monetary damages.²

Fungibility in semiconductor industry

The term "fungibility" is used by Intel Corporation to express the idea that a process tool is compatible across multiple production lines or products. For instance a 'tool' may be used to etch the silicon core prior to the lithography phase of manufacturing. The same tool is also capable of being used in the assembly process to etch the package substrate prior to die placement. This tool is 'fungibile' and capable of crossing over multiple products or manufacturing processes.^{citation needed}

See also

• Gold standard
• Private currency
• Silver standard

References

1. ^ S. Williston, The Law of Contracts § 1338 (1920); Farnsworth, Legal Remedies for Breach of Contract, 70 Colum. L. Rev. 1145, 1147 (1970)
2. ^ Bunge Corp. v. Recker, U.S. Ct. of App., 8th Cir., 1975; Restatement (Second) of Contracts Ch 16. introductory note (1981)